800.48 FRP/8–247: Telegram

The Ambassador in China ( Stuart ) to the Secretary of State

1641. Par. 4. Believe proposals in Rap 18 (Deptel 904, July 22, repeated Shanghai) approximate closely Embassy’s conclusions and previous recommendations for foreign aid program in China. Specific points on which agreement or parallel thinking now presumably exists enumerated herewith. Additional unanswered points or open items on which Dept’s advice or confirmation desired, set forth alphabetically in Par 554 following this message.

Target expenditures. Total program will be budgeted at $30,000,000 with slight leeway understood to exist in excess thereof. [Page 1330] Medical supplies, non-basic foods and special items will be kept within $5,000,000 portion of this if possible. Latter limit also applies purchases outside U. S., including rice Southeast Asia and South America.
Supplies. Procurement in U. S. will, unless particular exceptions agreed by U. S., be handled by Agriculture Dept. Except as noted paragraph 1 above, purchases will cover minimum 43,000 tons U. S. rice already allocated for October–December shipment, 50,000 tons flour or wheat equivalent September–December shipment plus additional equal amount flour or wheat equivalent in same period subject to detailed justification and favorable allocation by IEFC. (ReDeptel 923, July 25.) Supply program will now be developed here to provide satisfactory coordination of and integration with Chinese Govt import plans, and future allocations indigenous supplies, in order to meet controlled distribution and rationing needs adequately and efficiently.
Voluntary agencies. These will be relied upon for direct relief activities, including distribution supplies and expenditures sales proceeds, to greatest extent possible. Specific projects setting forth both types of assistance now in preparation by various agencies. When available early this month, these will be presented in consolidated schedule for concurrence by Chinese. Latter still taking position they are primarily responsible for selection both agencies and projects. Rather than argue further principle involved, Embassy intends to complete preparation this part foreign aid plan and seek its acceptance by Chinese prior to signing of relief agreement, on assumption Dept has already indicated support this procedure.
Relief for famine areas. Where feasible and to greatest extent possible, U. S. foreign aid supplies or sales proceeds therefrom will be used to alleviate suffering in interior where serious food shortages develop. Present UNRRA efforts this direction, which now utilizing balance of previous relief imports, will be supplemented by effective administrative organization, either Govt or private, remains established to implement these efforts. Expect voluntary agencies to inherit these responsibilities generally as CNRRA liquidates and to submit plans for consideration as noted paragraph 3 above.
Controlled distribution and ratiqning. Major portion of cereals in program will be used to support inauguration these urban consumption and price control measures. Rate of flow and term of U. S. supply support will be made most explicitly flexible in agreement, however, and subject to (a) effectiveness, in our judgment, of Chinese development these plans, (b) Chinese efforts as new, crops come in to build adequate stocks to maintain system, (c) administration and selection of groups with economic rather than political [Page 1331] objectives in predomination and (d) progress towards full-scale rationing and equitable distribution.
Sales proceeds. Supply distribution under paragraph 5 above will bring regular yield of CN local currency to support (a) expenses in China of relief adviser staff, (b) activities envisaged paragraphs 3 and 4 above, (c) food-producing rehabilitation activities and (d) more effective indigenous crop collection to support controlled urban distribution. Embassy proposes to negotiate at regular intervals these sales prices in CN after deliveries in order to protect program against inflationary price changes. Funds will be kept with Central Bank and only disbursed on order relief adviser or with his concurrence.
Transportation and storage. Because of shortages in Chinese ocean shipping, U. S. flag vessels, or charters approved by U. S., will presumably be used to bring program supplies to China. Chinese will be pressed to assume maximum share internal transport costs, mainly by giving special rates on rail movements and warehouse charges from Govt-owned godowns.
Relief agreement. Revision Italian agreement on basis above points being prepared. ReDeptel 775, June 25. Gilpatric, on basis his knowledge details involved, being asked refer this to Dept from Shanghai for clearance prior to submission Chinese. Latter now pressing for early understanding and believe it desirable present draft for final negotiations soonest.

Sent Dept, repeated Shanghai 673 by courier.

  1. Embassy’s telegram No. 1642, infra.